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BA Deere
Honored Advisor

Elevator cosolidation, a good idea?

I`m not going to mention the 2 coops by name to better freely talk about them, but it isn`t too hard to figure out.  Okay 2 elevators both having each 20 sites are proposing a merger and there will be a upcoming vote.  Now, the board of directors recommend a "yes" vote to "better serve you",  the employees have mixed emotions to say the least.

 

I honestly don`t know which way to vote, I don`t like things getting bigger but that seems to be the way of the world and if they need to get bigger to "better serve me" maybe I should vote yes. However, if the "golden boys" at the elite sites get preferential treatment and "non-performing sites" get closed or starved out in favor of upgrades at the elite sites, then maybe vote no.

 

I am a member of a coop that does have over 50 locations and so far they haven`t starved any sites out, but of course we`ve all had a pretty good last 8 years.  Past performance isn`t indicative of future gains.   One of the best elevators that I go to have only 3 sites and their bids on grain are the yardstick and their inputs are competitive, but there does seem to be a "pecking order" on when the terragator shows up at your place.    

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21 Replies
Kay/NC
Honored Advisor

Re: Elevator cosolidation, a good idea?

I may be wrong, but maybe it is a sign of proactive mindset, preceding a very likely farm economy downturn. Possible?
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BA Deere
Honored Advisor

Re: Elevator cosolidation, a good idea?

Well, a popular comment when someone first hears about the merger is, `which elevator is the one in trouble?...or are they both in trouble?   Even though it happened 18 yrs ago, the "HTA debacle" is still fresh on everyone`s minds, that`s what brought about there being the elevators having 20 sites in the first place.

 

Elevator systems that have 20 or 40 bin sites, might have only one site handling the feed and fuel, which creates a heck of a territory for the fuel and feed trucks. It`s efficient when it`s working, but if the fuel man is in the hospital or if one of the feed truck`s  transmission is out, it can get challenging.

 

* reason for edit change LDP to "HTA"

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Red Steele
Veteran Advisor

Re: Elevator cosolidation, a good idea?

BA,I must have missed out on the LDP scandal, or were you thinking of the HTA scandal and got your acronyms mixed up? $20 says the same group of families that got the 80's debt writeoffs, and then shafted the elevators and their fellow farmers and patrons in the HTA ripoff ,are now poised to do it all over again as their expansion plans bleed red ink. Nothing like the roaring tigers when they get caught in a snare to become pussycats for a few days before they come back roaring again.

 

 

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JP1976
Friend

Re: Elevator cosolidation, a good idea?

The two largest Coop's in our area recently announced their merge. While there has been a lot of discussion, the fuzzy math that the directors are promoting makes me a little leary. Not that there aren't efficiencies to be gained by getting larger but the numbers don't add up exactly. My biggest concern is that neither is currently interested in serving smaller customers right now and I can't imagine that it will get better with more size. How much further will the dismal customer service fall when there is no other real competition?

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Jim Meade / Iowa City
Senior Advisor

Re: Elevator consolidation, a good idea?

There has been some consolidation locally, but it's not rampant.  Even so, the small, nimble suppliers are doing well and many more farmers are selling directly to the processors or through a non-coop grain buyer.

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BA Deere
Honored Advisor

Re: Elevator cosolidation, a good idea?

Thanks Red, I changed to HTA.  I`ve got too much alphabet soup in my brain    Smiley Happy

 

 

The HTA debacle did destroy a quite a few elevators, the Big Shots that caused it were as popular as polio in the communities.  Those that simply "delivered the grain" were proud and any HTA discussion are usually proud to make that fact known.

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BA Deere
Honored Advisor

Re: Elevator cosolidation, a good idea?

I don`t think a small farmer can expect much more than just the local site having more staying ability, not much more.  And when it becomes a part of 40 other sites and times get tough, any deemed as inefficient will get the ax. 

 

The coop system really only serves small and medium farmers now.  It seems that the real Big Shots don`t do business with the local elevator, they bin their grain and deliver to E-plants and feed mills to get that extra 10¢.  They don`t buy fertilizer at the coop they buy wholesale and spread their own and only a "chump" would buy chemicals at a coop. 

 

But a good elevator manager is priceless, they will go to bat for their customers. 

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sw363535
Honored Advisor

Re: Elevator cosolidation, a good idea?

Same economics apply to coops as to farms.  There is an ever growing need to keep the trade numbers up.  And some times combining is needed just to hold the numbers steady.  Every time a farm entity retires and gets absorbed into the landscape, the coop looses a customer.  And large farms bypass the middle man.  

 

Talk directly to a board member.  Hard to get past the "selling" point of a change.  There is statistical reasons for that kind of change.  Bad debt, low sales, loosing market share,,,,,,,,,,,,,, there are real reasons.

The purpose of having a board is decision making.  Not hiding privilidged information.

 

I watch two coops.  One has grown and expanded to the point of having 17+ board members and is handicaped, but surviving.  The other is a big single location, well managed one.  5 board members.  Effecient.....strong.

Both are struggling. Without a decent dry land crop in 5 years.  

 

 

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JP1976
Friend

Re: Elevator cosolidation, a good idea?

I do agree that the need for consolidation does exist in their business just as it does in most of the farm economy. These are not small Coop's, combined they will have more then $2 billion in sales.

I have done business with both of the consolidating Coop's and because of that I have heard from both sides. Most of the employees seem to be receptive to the idea and feel that it will be a step in the right direction and it probably is.

My concern is still the customer service aspect of it. With their lack of interest in small farmers, how long will it be before I can't get service because I don't meet their minimum criteria? Sure they can say that they will continue to serve all of the members that they have, but  I know the priority stays with those who can demand the most volume.

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